Entering the Crypto Era: The Federal Reserve's Strategic Shift and Global Impact

Author: Zhang Feng

In 2025, the Federal Reserve will transform from a passive, defensive regulatory role into a key force actively participating and strategically positioning itself. Through a series of policy adjustments and technological innovations, it will profoundly influence the global financial market landscape.

From eliminating the pre-approval requirement for banks' crypto business to promoting the "streamlined master account" reform, and then to collaborating with multiple institutions to build a regulatory framework and establishing its own cryptocurrency exchange, the Federal Reserve's intensive actions reflect multiple strategic considerations: maintaining the international status of the US dollar, preventing systemic financial risks, and vying for financial discourse power in the digital age.

I. Key Processes of the Federal Reserve's Involvement in Crypto Business in 2025

In 2025, the Federal Reserve, through a two-pronged approach of "policy easing" and "infrastructure-first," promoted the transformation of US crypto regulation from partial and fragmented to comprehensive and systematic.

Policy easing removes institutional barriers to traditional banks' participation in crypto business. In April 2025, the Federal Reserve took the lead in revoking the pre-approval requirement for banks' crypto business, which had been in place since 2023, officially ending the "New Activities Oversight Program." This meant that banks no longer needed prior regulatory approval to conduct crypto asset custody, mortgage lending, and other businesses, but were instead integrated into the existing banking regulatory and risk management framework. The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) followed suit, with the three regulatory agencies jointly repealing a series of restrictive regulations, allowing banks to independently develop crypto financial businesses under the premise of controllable risk. In June of the same year, the Federal Reserve further adjusted its regulatory direction, explicitly stating that "reputational risk" would no longer be used as a core indicator for assessing banks' crypto business. In the past, many banks avoided cooperating with crypto institutions to avoid public pressure; this adjustment removed psychological barriers to compliant collaboration between banks and crypto companies. In July, the Federal Reserve, together with the OCC and FDIC, released the "Guideline for Banks' Crypto Asset Custody Services," which details operational guidelines and risk control requirements, providing a clear compliance path for traditional financial institutions entering the crypto space. The regulatory framework was established, bringing stablecoins under unified federal regulation. In August 2025, the GENIUS Act officially took effect, marking the beginning of a unified federal regulatory era for stablecoins in the United States. This act requires stablecoin issuers to deposit 100% of their reserve assets with regulated financial institutions, and these reserve assets should primarily consist of highly liquid, low-risk assets such as U.S. Treasury bonds, while establishing strict audit and information disclosure systems. Under this framework, the Federal Reserve assumes primary regulatory responsibility, overseeing the compliance of reserve assets and the issuer's risk management capabilities. This legislation not only elevates the level of regulation but also, together with the EU's Crypto Asset Markets Regulation (MiCA), forms the two major benchmarks for global stablecoin regulation. In October 2025, Federal Reserve Governor Christopher Waller formally proposed the "Simplified Master Account" scheme at the Payments Innovation Conference. This scheme allows qualified crypto institutions, stablecoin issuers, and fintech companies to directly access the Federal Reserve's payment system without the need for commercial banks as intermediaries. While these accounts lack the full functionality of bank accounts such as intraday overdrafts, they enable real-time settlement of crypto asset transactions with latency controlled to within one second, significantly reducing settlement costs and time. This move breaks the traditional banks' monopoly in the payment and clearing field, providing the crypto industry with an efficient and low-cost funding channel. Meanwhile, the development of a cryptocurrency exchange spearheaded by the Federal Reserve is also accelerating. Based on a hybrid blockchain architecture developed under the "Hamilton Project," this exchange integrates a Real-Time Gross Settlement (RTGS) system and employs zero-knowledge proof technology to balance transaction privacy and regulatory transparency requirements. Test data shows that its two-phase commit (2PC) architecture has achieved a throughput of 1.7 million transactions per second, supporting cross-chain settlement of mainstream crypto assets such as Bitcoin and Ethereum with tokenized government bonds and gold. This will be the world's first compliant crypto asset trading platform led by a central bank, and is expected to have a profound impact on the industry landscape. II. Regulatory Coordination Mechanism between the Federal Reserve and the SEC In the US's "multi-governance" crypto regulatory system, the coordination between the Federal Reserve and the Securities and Exchange Commission (SEC) is particularly crucial, forming a complementary governance model of "functional regulation + institutional regulation." Regulatory boundaries are defined by asset attributes. The Federal Reserve's regulatory focus is on crypto businesses involving banks, the issuance and circulation of stablecoins, and funding channels between crypto and traditional finance; the SEC, based on securities-related laws, exercises jurisdiction over crypto assets that meet the definition of securities (such as security tokens and some ICO tokens), and is responsible for trading platform registration, conduct regulation, and investor protection. Since 2025, the two sides have further clarified their responsibilities through joint statements and other means: In April, a consensus was reached to place most stablecoins under the federal regulatory framework led by the Federal Reserve, with the SEC only providing supplementary regulation for synthetic stablecoins with securities characteristics; in July, regarding Coinbase's staking service, the SEC determined it to be a securities brokerage business, while the Federal Reserve focused on reviewing fund custody and reserve conditions, forming a regulatory synergy. Joint enforcement is used to prevent regulatory arbitrage. As the cross-sectoral nature of crypto businesses becomes increasingly apparent, the Federal Reserve and the SEC have established an information-sharing and joint enforcement mechanism. In the area of ​​asset custody, the Federal Reserve sets capital adequacy and reserve standards, while the SEC oversees information disclosure and investor protection. In the area of ​​tokenized securities, the two parties jointly issued the "Regulatory Guidance on Tokenized Securities," clarifying that related assets must simultaneously meet payment settlement and securities regulatory requirements. This collaboration effectively curbs regulatory arbitrage. For example, a platform attempted to circumvent regulation with a hybrid product combining "stablecoins" and "security tokens." The Federal Reserve detected abnormal fund flows through payment system monitoring, and the SEC subsequently launched a securities compliance investigation, ultimately prompting the platform to rectify its practices, demonstrating the comprehensive coverage of regulation. III. Policy Interaction Between the Federal Reserve and Congress The Federal Reserve's cryptocurrency business strategy needs to be implemented under congressional legislative authorization, forming a collaborative relationship of "legislative guarantee + operational autonomy," but also facing the challenges brought about by partisan politics. Legislative authorization provides the basis for policy implementation. The legal basis for the Federal Reserve's participation in the cryptocurrency market mainly comes from Section 13 of the Federal Reserve Act, which authorizes it to provide credit support to various institutions in "extraordinary and emergency" situations. In 2025, Congress passed several pieces of legislation further empowering the Federal Reserve: the GENIUS Act clarified its leading role in stablecoin regulation; the Payment Systems Innovation Act provided a legal basis for the "streamlined master account" reform, allowing non-bank payment institutions to access the central bank's payment system. Congress fully incorporated the Federal Reserve's professional advice during the legislative process. For example, the 100% reserve and regular audit requirements in the GENIUS Act originated from earlier policy recommendations by the Federal Reserve. When promoting the construction of exchanges, the Federal Reserve also proactively adopted public-private partnerships and open-source technology models to comply with Congress's requirement to "control taxpayer risk." Balancing policy differences across party lines. There are clear partisan differences in attitudes towards crypto regulation within Congress: Republicans favor looser regulations, pushing the US to become a "global crypto hub," and support expanding the scope of "simplified master accounts"; Democrats, on the other hand, are more focused on financial stability and consumer protection, advocating for strengthened risk control while opening markets, such as adding stricter anti-money laundering provisions to the GENIUS Act. The Federal Reserve, in the partisan struggle, strives to maintain policy neutrality and independence, seeking a balance by designing open solutions with risk constraints. "Simplified master accounts," by setting balance and functional limitations while opening access, responds to market demands for openness while embedding risk control mechanisms; exchanges' use of zero-knowledge proof technology, while protecting transaction privacy, provides a transparent channel for regulation, gaining bipartisan approval. IV. The Direct Impact of the Federal Reserve's Intervention in the Crypto Business [Hypermotion of Traditional Banking Business Transformation] Following the easing of restrictions, large banks such as Bank of New York Mellon and JPMorgan Chase quickly launched services such as Bitcoin custody, significantly increasing the proportion of crypto-related revenue in the banking industry. Smaller banks, on the other hand, mostly chose to cooperate with crypto platforms to provide related services, exacerbating industry differentiation. Simultaneously, the "streamlining master account" reform weakened banks' intermediary role in payment and settlement, prompting banks to shift towards high-value-added businesses such as structured crypto asset products and cross-border crypto payment solutions. [Reshaping the Competitive Landscape of the Crypto Market] Compliance has become a core competitive advantage, with the market share of regulated stablecoins rising significantly and the scale of mainstream stablecoins such as USDC growing rapidly. Federal Reserve-led compliant exchanges are attracting substantial institutional funds due to their direct system connections, while traditional platforms like Coinbase are shifting towards providing compliance technology services to institutions. The valuation logic of crypto assets has also changed, with a significant increase in the proportion of transactions pegged to USD-denominated stablecoins, strengthening the linkage between the crypto market and traditional finance. This strengthens the dollar's control over international finance. The vast majority of global stablecoins are pegged to the US dollar, and their reserve assets are primarily US Treasury bonds, forming a "stablecoin—crypto trading—US Treasury bond" funding cycle, further consolidating the dollar's international status. Simultaneously, the Federal Reserve has strengthened its cross-border financial sanctions capabilities through on-chain analytics, effectively curbing the use of crypto assets to circumvent sanctions and attracting global legitimate crypto capital to the US market. V. The Three Logics of Strategic Transformation Maintaining the International Dominance of the US Dollar. Faced with competition from digital yuan, euro stablecoins, and other currencies, the US dollar's share in cross-border payments has declined. The Federal Reserve realized that failing to integrate the crypto system into the dollar ecosystem could lead to the marginalization of the dollar in the digital finance era. Therefore, by establishing the dollar as the primary settlement unit in the crypto world and pegging it to US Treasury bonds as a stablecoin reserve, the Federal Reserve has constructed a new cycle to strengthen the dollar's hegemony. Preventing the Transmission of Systemic Risks. The connection between the crypto market and the traditional financial system is becoming increasingly close, and cases of risk transmission are commonplace. Events such as the bankruptcy of signature banks demonstrate that isolated regulation is no longer sufficient to manage risks. The Federal Reserve, through measures such as leading the construction of exchanges and implementing "streamlined master accounts," has brought crypto activities under its regulatory purview, achieving market development under controllable risks. The competition for the right to set digital financial rules is also growing. In the context of increasing financial digitalization, the export of technical standards and rules has become a core element of national competitiveness. The Federal Reserve, through open-sourcing its architecture through technology projects such as the "Hamilton Project," is attempting to dominate the global standard-setting for crypto and central bank digital currencies. Simultaneously, the rising influence of the crypto industry in US politics has also promoted a moderate opening of the regulatory environment. VI. Promoting the Compliance, Institutionalization, and Globalization of Crypto Businesses The market ecosystem will undergo institutional transformation. Institutional investors will become the main force in the market, with pension funds and mutual funds accelerating their entry through compliant channels. Product structures will shift from primarily spot trading to diversified and compliant products such as tokenized government bonds, crypto ETFs, and structured wealth management products. The DeFi sector will see differentiation, with compliant projects developing through integration with traditional finance, while completely decentralized projects that circumvent regulation may gradually become marginalized. Global regulatory standards will tend towards unification. The US regulatory model, characterized by "functional regulation + technological neutrality," and the stablecoin framework established by the GENIUS Act, will provide a reference for other countries. Through multilateral platforms such as the G20 and the Financial Stability Board (FSB), the US actively promotes the internationalization of its regulatory concepts and technical standards, facilitating cross-border coordination of crypto regulatory practices. Technology is developing towards a balance between compliance and efficiency. Technologies such as zero-knowledge proofs, on-chain analytics, and privacy computing will be more widely used to balance regulatory transparency and user privacy. The integration of blockchain with traditional financial infrastructure has become a key area of ​​innovation, driving crypto transactions from closed-loop on-chain transactions to cross-system interconnection. The competition for dominance in technical standards will also intensify, becoming a crucial dimension of competition in digital finance. The Federal Reserve's deep involvement in the crypto business since 2025 marks a significant power shift in the global financial system in the digital age. Through policy easing, infrastructure investment, domestic coordination, and the export of international rules, the Fed aims not only to consolidate the dollar's status and control financial risks, but also to shape the future global order of digital finance. Its actions have significantly altered the operating logic of the crypto market, driving the industry towards institutionalization and compliance. Looking ahead, the crypto market may enter a new phase of "central bank-led compliance." For global participants, understanding the Fed's strategic intentions and policy logic, and adapting to the regulatory framework it promotes, is crucial to seizing opportunities and meeting challenges in the digital finance era. Whether the Fed can achieve a long-term balance between innovation incentives and risk control, and whether it can continuously strengthen the dollar's hegemony through its crypto strategy, will remain to be tested by both international competition and domestic politics.